Coinbase has filed a motion to dismiss the recent lawsuit brought against it by the U.S. Securities and Exchange Commission (SEC). The lawsuit accuses Coinbase of facilitating unregistered trading in 12 digital tokens classified as securities.
Coinbase vehemently contests these claims, arguing that the SEC’s interpretation of securities laws deviates significantly from existing legal frameworks. In its motion to dismiss, Coinbase highlights concerns about the SEC’s overreach and infringement on its due process rights, guaranteeing legal matters be resolved under existing laws.
Questioning the SEC’s Securities Classification
Coinbase asserts that digital assets are not securities, disputing the SEC’s classification. The company emphasizes the lack of consistency in the SEC’s decisions, pointing out that six of the twelve tokens were not deemed securities during previous interactions with Coinbase in 2021.
Furthermore, Coinbase highlights the SEC’s approval of its registration statement, allowing the company to trade over 240 tokens, including disputed ones, after an extensive review process.
Coinbase’s legal team argues that even if the SEC’s allegations are true, the lawsuit should still be dismissed due to the absence of a valid legal claim. They contend that the SEC’s action goes beyond its regulatory authority and constitutes an abuse of process.
Coinbase emphasizes that the transactions on its platform do not involve the essential properties of debt or equity securities and that no ongoing contractual relationship exists between Coinbase and its customers regarding the tokens traded.
Congressional Recognition and Lack of Authorization
Coinbase highlights that Congress has consistently acknowledged the absence of assigned regulatory authority over digital assets. Despite actively considering legislative proposals related to digital asset regulation, no law enacted since Coinbase’s public offering in April 2021 grants the SEC the authority it claims in this lawsuit.
Coinbase argues that the SEC lacks explicit congressional authorization to exercise wholesale power over the emerging trillion-dollar cryptocurrency industry.
Coinbase’s Business Operations and SEC’s Reversal
Under federal securities laws, Coinbase has never operated as a securities exchange, broker, or clearing agency. The company points out that the SEC declared its registration statement effective in 2021, permitting Coinbase’s shares to be sold to investors without suggesting further registration. Coinbase asserts that the SEC’s sudden reversal is unfounded, as there have been no material changes to its business and no new information presented.
Coinbase’s motion to dismiss the SEC’s lawsuit reflects its determination to challenge the regulatory authority and classify digital assets as securities. The company argues that the SEC’s allegations are inconsistent, and its claims exceed its legal authority. Coinbase contends that the lawsuit violates its due process rights and emphasizes the lack of congressional authorization for the SEC’s regulatory actions.